Payroll Taxes Owed in Cape Coral

Radha Rothrock is a Cape Coral tax attorney. Part of her practice involves negotiating delinquent payroll taxes with the IRS.

Payroll 941 Penalties

When you own a small business, you have two types of business taxes to pay, the employer portion and the employee portion. The business owner is suppose to withhold social security, medicare, and federal taxes from the employee's check and deposit that money in a trust account. The amount is to be paid to the I.R.S. on the employee's behalf. This portion of the tax is called the "employee portion" of the payroll tax, or the "trust fund portion" of the business tax. In addition, the employer must contribute an amount of tax equal to what the employee contributes. This portion of the tax is called the "employer portion" of the tax. If you fail to withhold payroll taxes, the IRS can assess a penalty equal to the amount of the taxes that you owe. This is called the "trust fund recovery" or a "100% payroll penalty."

What can you do if you owe payroll taxes?

1. Appeal the imposition of the tax. You probably won't win the appeal, but you will buy some time to hire a tax professional.2. Wait for the statute of limitations to run. If the IRS does not collect the taxes within ten years of the date of assessment, they can no longer collect the taxes.3. Pay the taxes. The IRS allows small businesses to pay the payroll tax through an installment agreement. If the business owes less than $25,000, the IRS does not require the business owner to submit a financial disclosure.4. File bankruptcy. The "trust fund" or the "employee" portion of the payroll tax described able is not dischargeable in bankruptcy; however, filing a chapter 13 or chapter 11 bankruptcy allows the business owner to pay the trust fund portion over a period of five years. The "employer" portion of the payroll tax is dischargeable if the following conditions are met: (a) There are more than 3 years between the date the 941 tax return was last due, including extensions, and the date the bankruptcy was filed; (b) there are more than two years between the date the 941 tax return was filed and the date the bankruptcy case was filed; and (c) the employer did not willfully evade payment of the tax.